A few days ago, one of our clients asked why should they have their business valued when they don’t have plans to sell it anytime soon. After all, why would they invest time, effort and resources in a lengthy process that probably wouldn’t matter a few years from now.
As you may understand, business valuation can be quite complicated and its benefits can be different in each case. But, as a business valuation advisor in Singapore, we try as much as possible in this article to convince you why it matters.
What is Business Valuation?
Before we delve deep into why valuation matters, it’s crucial to first identify what valuation is and why your company has to be valued.
Valuation is a process that determines the economic value of a business, an asset, or a company. Although its goal is to determine the fair market value, valuation doesn’t guarantee the ultimate price to be paid as the final price can vary based on several factors including the state of the industry as well as the valuation method and economic conditions. You should also count on the fact that no two business valuation companies in Singapore can provide you with estimates that are exactly the same.
For many businesses, SMEs in particular, undergoing valuation may seem like an unnecessary expense and it simply doesn’t make sense in two situations: you’re not planning to sell the business for at least more than a decade or your business is so small you don’t think it would anywhere near the value you hope for it to sell one day.
But, of course, not all businesses are in it for the long haul and are hoping to sell sooner than later and if this is the case for you, it’s crucial to, as early as possible, set a goal on how much value you want your business to grow before selling. Having such information allows you to have the upper-hand when putting your business up on sale and this is where we can help - by providing an accurate estimate of the state of your business and where it’s heading.
Did we mention that your business can still benefit from valuation even when you don’t have plans to sell soon? Here’s how:
It establishes how far you’ve come and how far you have to go. Whatever the state of your business right now, it’s nice to know how far you’ve come from the moment you started it. You’ll never know, you might even be surprised to learn that you’re a lot farther than what you thought.
It allows you to set realistic goals. Because you know where your business stands at the moment, it allows you to set plans that are as accurate as possible to realize your goals. It also keeps you from the disappointment that you haven’t met a rather impossible goal you set in the past.
It provides tax information. Selling your business has tax implications - and on top of it all, a valuation will get you to search for alternatives to minimize its impact should the time come. Taxes can take a significant amount from your sale price so you will want to charge for a higher price to achieve the price you want to net.
Business valuation still sounds confusing to you? Get in touch with us today and we’d be happy to discuss it further with you!
